I enjoyed hearing @MehrsaBaradaran and others discuss strategies for banking the unbanked during the recent house hearing. But I want to push back against something Mehrsa said then.
She said, "We give banks a charter, and they have a monopoly on payments and financial transactions and credit." With all due respect to Mehrsa, this is abusing the plain meaning of terms.
To refer just to Wikipedia's definition (the first definition that comes up on Google) "A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity."
Besides other suppliers of payment services, there are over 5000 commercial banks and savings institutions in the U.S., and about the same number of credit unions. If that makes the U.S. payments industry a "monopoly," what industry could not be described so?
Yes, banks are "privileged" in that they depend on charters. But this is not so different from any business license. The identification of "chartered company" with "monopoly" is anachronistic: over two centuries ago, the two things were synonymous. That's no longer true.
Now if you want examples of real, honest-to-goodness monopolies in both the 18th century and modern economists' sense of the term, here are two: the Federal Reserve System, and the U.S. Postal Service. The one enjoys a monopoly of many payments products and services today.
The other enjoys the exclusive right to deliver 1st class mail. Mehrsa's proposal would extend the privileges enjoyed by both to include that of providing retail deposit accounts to ordinary citizens. Together, they would indeed be competing with banks,...
But it certainly isn't correct to say that by so doing they'd be busting a supposed bankers' "monopoly." Were the question one of eliminating monopoly privileges, the solution would have to be one of enhancing private firms' opportunities to compete w/ the Fed and USPS, ...
...not the other way around!

By making these points I don't pretend to be offering an argument against either Fed retail or postal savings accounts. I _am_ arguing against abusing the term "monopoly" to make a specious argument in favor of either.
Nor do I want to seem to pick on Mehrsa's testimony. Believe me, I might complain a lot more about some of the other witnesses' statements. And I may yet do so!

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More from @GeorgeSelgin

24 Jul
Thread: Me and financial laissez faire. To the charges of extolling the virtues of some past "free banking" arrangements (but _not_ the U.S. version!), and urging that others recognize the possibility of market-based monetary order, I plead guilty. But...
I deny being a knee-jerk proponent of monetary or financial laissez faire, and I regret that some of my critics either read me that way, or erect a cardboard-cutout knee-jerk laissez-faire "version" of me, the better to easily knock it down!
My position has long been, not that government intervention in money and related industries is bad per se (like practically all economists, I'm a consequentialist), but that to understand what such intervention really accomplishes one must understand what would happen w/out it.
Read 18 tweets
23 Jul
I agree 100% with Steve's take on fiat money. It's value doesn't rest upon it's being a redeemable claim to anything. The mere fact fiat can purchase things at varying prices, including "get out of jail" cards from tax authorities, doesn't make it a "claim" to anything.
Because the U.S. government can decide at any time to alter the # of fiat dollars it takes to satisfy tax obligations, those dollars are not "claims" to any pre-agreed upon amount of "get out of jail" cards (or gov't services or whatever you choose to call what tax payments buy).
In contrast, a commercial bank is not free to say to its depositors, "We regret to inform you that we've raised the price of Federal Reserve notes, so that it will now take $2 of your credits with us to purchase a $1 bill."

A "claim" is a debt is a fixed-price commitment.
Read 10 tweets
22 Jul
Evidently @RaulACarrillo didn't like my argument: he tweeted two snide dismissals, only to delete them before I could reply. But as they are still visible (I include a screenshot of one) I will reply to it.
Now, Mr. Carrillo, my comments referred only to the question of "monopoly," the definition of which is or ought to be known to any 1st year econ student, or anyone who has a decent vocabulary.
(That Wikipedia, which you also take me to task for citing, happens to offer the stnd. definition hardly makes it wrong.)

My point is that entry into the banking business is not so strict as to allow that business to be characterized as a "monopoly"
Read 4 tweets
22 Jul
Thread: So, Mr. Burstein complains that neither Tether nor Circle is a "stablecoin" in anything but name. Well, here is USDC's price chart for the last year:
Evidently, so far as Circle is concerned, Burstein can only mean that, instead of being always worth exactly $1, USDC (1) usually trades at an almost constant albeit tiny _premium_ relative to USD and (2) occasionally spikes above it.
If that's "instability," what's wrong with it? Just what is Mr. Burstein seeing that I'm not seeing? Or is he merely seeing an "unregulated" assets and deciding, on strictly a priori grounds, that it _must_ be unstable and therefore in need of greater regulation?
Read 4 tweets
21 Jul
Want to write like an academic economist? Here's my sure-fire guide to Standard Econ English.
"Recent." Used with "writings" or "work" in your opening sentence to assure readers that you are au courant, which is to say, determining your subject matter the way herring determine which way to swim.
"The remainder of this paper is structured as follows." Indispensable start of your introduction's final paragraph, which you must include because the preceding paragraphs have somehow failed to do what they're supposed to.
Read 13 tweets
20 Jul
Thread: The right way to go about deciding how to regulate stablecoins.

Having explained why loose (and misinformed) comparisons with 19th century banknotes are the wrong way to proceed, I thought I'd offer some positive suggestions.
(1) Acknowledge the fact that there are many types of stablecoins, with different underlying technologies and principle uses. It is highly unlikely that any broad-brush regulatory treatment will be appropriate to all.
(2) Stop calling them "money." They are niche exchange media, not generally accepted exchange media. And that is itself not a bad thing so long as national monies are also available.
Read 13 tweets

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